Risk management is one of the most important principles in forex, and mastering it is what separates successful traders from the rest. This is why MetaTrader 4 is so popular among traders as it has all sorts of options that allow you to shield yourself from risk. In this article, we're going to show you why it's essential that you know how to use risk management with MT4, and a few tips for learning how to manage your risk more efficiently through the platform.
Forex Markets are Notoriously Difficult to Monitor
One of the most important reasons why you need to master risk management with forex is because of how difficult it is to time the markets. The markets are open 24/7 all around the globe, and it’s very hard to know when and how they will react to certain announcements and information. Stocks, on the other hand, are much more predictable because of the set hours and regionality.
Metatrader 4 has a number of analytical tools and a wide variety of stop-loss and automatic trading options. This allows you to coordinate trades using indicators and keep your chances of making the wrong move to a minimum. They also allow you to cash in on trades once you’ve reached a certain gain level or get out if you lose too much.
For more tips on forex trading, you may check out this forex correlation cheat sheet.
Allows you to Use Leverage More Safely
You cannot get success with the forex in the short or long term without using leverage. People often recommend that traders start with a 1:10 leverage, but the most successful traders go much higher than that.
You can’t get to higher leverage levels and be successful without having a sound risk management strategy and knowing how to use MetaTrader's risk management tools. Making trades without stop losses with high leverage is a sure recipe for disaster, but, when you know how to use take profit and stop losses, you can minimize risks while maximising your chances of returns. You’ll also be able to take the stress out of monitoring price movements.
Prevent Liquidity Issues
Knowing how to manage risk management will also be essential if you like to trade exotic currencies. While you may not have to worry about liquidity when trading pairs containing the Euro, USD, or other currencies like the AUD and CDN, you might run into liquidity issues if you want to trade African pairs or pairs in areas like Southeast Asia or Latin America. Using MetaTrader's stop order, pending order, and automatic trading options will help you reduce liquidity risks there and help you capitalise on hidden opportunities.
It Takes the Human Factor Out
It can be exciting to make trades in real time, but successful traders do not operate on emotion. They use strategy, create trading journals, and stick to very strict objectives. Emotional traders often get out of trades too fast out of panic or wait too long to exit positions out of greed. MetaTrader 4 has a plethora of tools that will take the human factor out of the equation and allow you to trade more methodically.
Conclusion
Now that you know why learning how to manage risk through MetaTrader is essential, it would be a good idea to learn a few strategies today and make risk management a priority. Risk management is not a guarantee that you’ll get rich but it can put a hard stop on how much money you will lose, which is very important for survival, especially if you’re starting with modest capital.
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